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Entries for treasury stock On January 31, Wilderness Resorts Inc. reacquired 22,500 shares of its common stock at $31 per share. On April 20, Wilderness Resorts sold 12,800 of the reacquired shares at $40 per share. On October 4, Wilderness Resorts sold the remaining shares at $28 per share. Journalize the transactions of January 31, April 20, and October 4.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 5PEA
Textbook Problem
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Entries for treasury stock

On January 31, Wilderness Resorts Inc. reacquired 22,500 shares of its common stock at $31 per share. On April 20, Wilderness Resorts sold 12,800 of the reacquired shares at $40 per share. On October 4, Wilderness Resorts sold the remaining shares at $28 per share.

Journalize the transactions of January 31, April 20, and October 4.

To determine

Prepare the journal entries for the transactions made on May 27, August 3, and November 14.

Explanation of Solution

Treasury Stock: It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.

Record the repurchase of 22,500 shares of own stock at $31 per share.

DateAccount Titles and ExplanationDebit ($)Credit ($)
January 31Treasury Stock (22,500 shares × $31 per share)697,500
       Cash697,500
(To record purchase of treasury stock)

Table (1)

  • Treasury stock is contra-stockholders’ equity account with a normal debit balance. Thus, when treasury stocks are purchased, it decreases the stockholders’ equity account. In this case, it reduces the stockholders’ equity by $697,500. Therefore, treasury stock account is debited with $697,500.
  • Cash is an asset. It is decreased as cash is paid for the purchase of treasury stock. Therefore, the cash account is credited with $697,500.

Record the sale of 12,800 shares of treasury stock for cash at $40 per share.

DateAccount Titles and ExplanationDebit ($)Credit ($)
April 20Cash (12,800 shares × $40 per share)512,000
 

     Treasury stock          

     (12,800 shares × $31 per share)

 396,800
 

     Paid-in capital from treasury stock

    (512,000$396,800)

115,200
(To record sale of treasury stock for above the cost price)

Table (2)

  • Cash is an asset

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Chapter 13 Solutions

Financial Accounting
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